Subsidized student loans will get pricier this fall, thanks to Congress.
Students taking out government student loans could pay nearly a percentage point more in interest rates. Based on rates set at Wednesday's Treasury bond auction, undergraduate loans will likely pay an interest rate of around 4.66% and graduate school loans around 6.21%. That compares to 3.86% for undergraduates and 5.41% for graduates last year.
For seniors, with only one year of college left, it won't hurt as much. If they take out the maximum government student loans available for a year of $5,500, it could mean an additional $250 in interest payments over a 10-year period.
Freshmen, with at least four years of college ahead of them, will hurt more. They could pay $2,150 more over the life of the loan than what they'd owe if Congress had kept rates at 3.4%, according to the Institute for College Access & Success. The analysis is based on April estimates by the Congressional Budget Office.
"Interest rates are rising and they're going to continue to rise as the Federal Reserve backs off (economic stimulus)," said Mark Kantrowitz, senior vice president at Edvisors Network, which provides advice on college scholarships and student loans.
Rates on student loans are based on the 10-year Treasury note, which yielded 2.61% Wednesday. Rates are capped for undergraduate loans at 8.25% and for graduates at 9.5%.
Correction: An earlier version of this article used data from the Institute for College Access & Success about new rates for freshmen students that was incorrect. The institute has since corrected its data, and this article has been updated.